Both Celestica and Dell Technologies saw their shares tumble 22% in a single week, not because of company‑specific news but as the market reacted to political developments that could reshape AI‑hardware demand.
Key points
- Both Celestica and Dell fell 22% after the November midterms, despite no company‑specific negative news.
- A Texas data‑center moratorium, promised by the incoming governor, could curb AI‑hardware demand in a region that represents about a quarter of planned U.S. capacity.
- Celestica raised its 2027 revenue and EPS guidance while trading at a forward P/E well below its five‑year average, suggesting a valuation discount.
- Analysts see the political risk as significant but believe demand may shift to other states, leaving the current price potentially attractive for long‑term investors.
Celestica (CLS) and Dell Technologies (DELL) each slipped 22% last week, a move tied to the Democrats’ sweep of the November 3 midterm elections rather than any adverse earnings release. The sell‑off was part of a broader retreat in AI‑hardware stocks after the political outcome raised concerns about future data‑center construction.
In Texas, newly elected Democrat Gina Hinojosa pledged to halt new data‑center approvals until state legislation addresses environmental and other concerns. She said, "When I am governor, I will issue a moratorium, a ban, on all data center approvals until laws can be passed by the legislature to protect Texans." Texas accounts for roughly 27% of the data‑center capacity planned nationwide, according to Wells Fargo, making the promise a material risk for companies that supply AI‑focused server equipment.
Midterm results trigger a broad AI‑hardware sell‑off
Celestica, however, reported strong third‑quarter results on Oct. 26, with revenue up 83% to $5.83 billion and a beat of its own guidance. The company lifted its 2026 revenue target to $21.0 billion and adjusted EPS to $11.55, and it projected $40.0 billion in revenue and $21.50 in adjusted EPS for 2027. CEO Rob Mionis noted, "The demand environment continues to be very robust, supporting our 2027 revenue outlook, with customer demand forecasts meaningfully higher for 2028."
Financially, Celestica now trades at about 11 times forward earnings, well below its five‑year average multiple of 18 times, and under 10 times its 2027 guidance. The consensus price target from analysts exceeds twice the current share price. The company did trim its 2026 free‑cash‑flow outlook to $460 million (from $600 million) to fund working capital for 2027, while forecasting $1.5‑$2 billion of capital expenditures next year.
Texas governor‑elect promises a data‑center moratorium
Analysts acknowledge the Texas moratorium as the primary downside risk, but many expect that hyperscale customers will simply relocate new builds to other states. The prevailing view in the article is that, given the steep discount to historical multiples and the strong long‑term demand outlook, the stock could be attractive for investors willing to tolerate the political uncertainty.
The commentary comes from TIKR, which notes that its articles are not investment advice and that the firm holds no position in the discussed securities. Readers are encouraged to review the full analyst rating breakdown and consensus estimates on the TIKR platform before making any trading decisions.
Reader questions
What could a Texas data‑center moratorium mean for AI‑hardware makers like Celestica and Dell?
If new data‑center approvals are paused, the immediate pipeline of AI‑server orders in Texas could slow, affecting revenue growth. However, many analysts expect hyperscalers to relocate projects to other states, which may mitigate the impact.
Why did Celestica’s stock drop even after it raised its long‑term outlook?
The decline was driven by broader market sentiment after the midterms and concerns about the Texas moratorium, not by any negative company news. The sell‑off reflected investors’ reaction to political risk rather than the company’s fundamentals.
How does Celestica’s current valuation compare with its historical average?
Celestica trades at roughly 11 times forward earnings, compared with a five‑year average of 18 times, and is under 10 times its 2027 earnings guidance, indicating a notable discount relative to its own history.
Source: tikr.com
